Brokerage firm TD Ameritrade, a unit of Charles Schwab Corp. SCHW, has instituted trading restrictions on four Reddit-favorite stocks — AMC Entertainment Holdings Inc. AMC, GameStop Corp. GME, Avis Budget Group Inc. CAR and Digital World Acquisition Corp. DWAC.
What Happened: TD Ameritrade said it is limiting certain options strategies and blocking short-selling on the stocks of Avis Budget and Donald Trump-linked special purpose acquisition company (SPAC) Digital World Acquisition. There are no limitations on long calls and long puts for these stocks.
The brokerage also said it would not allow short-selling of GameStop stock currently and may also implement additional requirements on options strategies for the stocks of AMC Entertainment as well as GameStop.
Why It Matters: All the four stocks are seeing high interest on Reddit’s r/WallStreetBets forum, best known for short squeezes in heavily-shorted stocks such as GameStop and AMC Entertainment earlier this year.
Avis Budget, GameStop and AMC Entertainment are among the ten most discussed stocks on the forum as of Tuesday night, according to data from Quiver Quantitative.
A flurry of buying by retail investors on Reddit pushed up the price of these stocks and resulted in huge losses among short sellers that bet against the stocks.
Shares of Avis Budget surged more than 100% in Tuesday’s regular trading session after the company reported better-than-expected earnings for the third quarter. A potential short squeeze also likely contributed to the stock’s surge.
Digital World Acquisition is seeing high interest on the forum after the company announced a merger with Trump Media & Technology Group in October.
Price Action: Charles Schwab closed 0.1% lower in Tuesday’s regular trading session at $81.77, but rose almost 0.3% in the after-hours session to $82.00.
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.